ET Now: Do you think globally some clarity has emerged and global fear has subsided?

Sanjeev Prasad: Not really. Looking at the FOMC minutes which came out last night, it is clear that the US Fed is going for a tapering down of the bond buyback programme. If it will happen in December or early part of next year is pure speculation.

But given the fact that there is some improvement in the US economy, their job data is coming out to be reasonably good. I assume you will start seeing a tapering down sooner or later, though it is not going to be complete shut off of the tap on one fine day.

The world should be prepared for an environment where the global liquidity is less benign and India is probably going to be a lot more vulnerable in that situation. Especially countries like India, which earn a fair amount of high current account deficit, should be prepared for some pain.

ET Now: What is your expectation from Infosys tomorrow?

Sanjeev Prasad: We are not looking at any great set of numbers from Infosys as far as quarter on quarter revenue growth is concerned - maybe a 0.8% growth in dollar terms. The EBITDA margin will also decline primarily because the expenditure would be on the higher side with visa costing higher, typically in the first quarter. There has been an increase in wage cost and sales and market related expenses would also been higher side. Therefore, decline in EBITDA margins would be about 100-150 bps.

The more important thing is the guidance which the management gives, whether it sticks to the 6% to 10% dollar revenue growth guidance they had given initially for the full year.

I assume the market would be in a slightly generous mood for Infosys, because this is the first few days of Mr. Murthy's coming on board and it would be too much to expect miracles.

ET Now: If 6 to 10% gets slashed to 5 to 9%, are markets likely to punish that stock or will the markets give benefit of doubt?

Sanjeev Prasad: 5 to 9% is okay. If it goes to 3 to 6% kind of a number, that is when people will start getting really worried. However, people will live with 5 to 9%, with fair amount of support from the rupee.

Â ET Now: What else are you expecting from this earning season? Do you think this quarter is going to be lacklustre to weak?

Sanjeev Prasad: It is not going to be a great quarter. We are looking at 4% decline in the net profits for the BSE 30 index, pulled down by two sectors. One is the energy sector, where ONGC is not going to have a great set of numbers, primarily because of the fall in crude prices and even the subsidy amount in rupee terms is lower. The Government of India is insisting on charging the upstream companies $53 a barrel or in the case of ONGC, it becomes $63, including the counter sales. The realisation will drop by about a $7 a barrel for ONGC and that will reflect 33% decline in the net profits.

The other sector is metals and mining space, where both on QoQ and YoY basis, the LV prices are lower. Moreover, there have been a few shutdown issues in certain companies, there will be forex loss in the case of JSW Steel. In general, you will have a bad set of numbers for the metals and mining companies.

Elsewhere too, the volume numbers, in general, happen to be bad as auto numbers show, cement volumes have been weak. In total, a positive surprise is going to be limited.

The sector we should watch out for on the downside is the banking space, in terms of the bad news on the NPL side in terms of poor restructuring, slippages and provisioning.

ET Now: Should we acknowledge the fact that markets are resilient and we may have a bottom in place?

Sanjeev Prasad: There still is a lot of cause for concern. I do not think we have resolution to the current account/BOP issues. Structurally, we do run a large current account deficit, anywhere between $6 and $8 billion on a monthly basis, depending on crude prices and gold imports.

Moreover, the local environment is not benign. In the last three years, there was a lot of global liquidity, money was going to emerging markets, and India got its fair share. For example, in the FY13, we had a huge current account deficit, much higher than what is expected in the current year, but we got sufficient amount of capital flows then. I am not very sure if the market is going to be that generous this year.

The debt side of the equation worries me a lot more than the equity side. At least we can do a few things on the equity side, but on the debt side, the interest rate differential between, say, a 10 year GSec yield in India and 10 year GSec yield in the US is not attractive enough. At some point of time, may be more money gets pulled out.